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MANY OF LIFE’S decisions can be handled solo, without fretting over lasting negative outcomes. So what if we pick a lousy movie or choose a second-rate restaurant? Our suffering is short-lived, and our budget barely scratched. But what about the more crucial questions of life, when trying to wing it on our own or trusting the results of a quick internet search might yield painful consequences? Here are four areas of life where paying for expert guidance can be worth the price of admission:
1. Picking winners. Many fellow HumbleDollar readers are fairly confident about choosing investments to grow our money and keep it safe until needed. As an added bonus, some of us think tending money is among life’s most engaging pursuits. But what about folks who get anxious at the thought of trusting themselves with their life savings, or who just don’t want the bother?
No worries. There’s no shortage of firms clamoring for the chance to direct our dollars as they see fit. Trouble is, too often their service comes at a steep price, in the form of high commissions and fees. That’s important, because seemingly small increases in expense can knock thousands of dollars off portfolio growth over time. What to do?
One option is a fee-only financial planner. With this choice, we side-step a commission, though we’re still faced with how to pay. We might pick a flat fee arrangement, perhaps, or one based on a percentage of our invested assets. Along with investment advice, our money will probably buy detailed guidance on other aspects of our finances, like retirement and estate planning. The National Association of Personal Financial Advisors can help locate a fee-only advisor at NAPFA.org.
Searching for the lowest cost and not concerned with face-to-face contact? Check out the suggestions for online advice here. A few years back, I helped a close friend find low-cost financial advice from one of the suggested companies that’s a leader in providing investment choices with rock-bottom management fees.
Not long after he retired, a friend disclosed to me that he had rolled his 401(k) into an IRA with a financial services company. He didn’t know his cost, but I suspected a healthy slice was coming off the top. Turns out, between the management fee and fees charged by the active mutual funds he was invested in, he was forking over more than 3% annually.
My friend is intelligent, but not focused on managing money and has little interest in learning. Still, he recognized gaining ground against that level of expense was an uphill run. At my suggestion, he shifted his money to index funds at Vanguard Group and chose to pay for their Personal Advisor Services, for a total cost of under 0.4%. We both thought that move was the wisest decision for him.
2. Paying the toll. Tax reporting is not one of life’s simpler chores, even for a relatively uncomplicated mix of income, deductions and credits. But add in, say, tracking rental income and costs, selling investments, interpreting trust rules or a host of other possible scenarios, and the task can grow beyond the layperson’s ability or confidence level. It’s no wonder over half of tax filers pay a professional to prepare their returns (see Table 1).
Even so, is a tax professional really worth her salt? It depends. If we’re confident our tax filing captures every available deduction and credit while navigating each nuance of the thousands of pages of federal tax code, then maybe not. But if we’re wrong, we could be among those who, according to the IRS, leave billions of dollars in deductions and credits unclaimed. Or–shudder–we might get an invitation to defend our point of view. While hiring a CPA can’t guarantee the IRS won’t come calling, the extra layer of scrutiny may help avoid the possibility.
Even for skilled self-preparers, certain situations make hiring a CPA the prudent choice. When a debilitating illness forced my wife’s brother to sell his house in California prior to relocating near us in Georgia, she felt there were good reasons to hire a CPA to handle his taxes for that year. For one, the added complexity spawned doubt about figuring his tax liability. In addition, she felt the weight of fiducial responsibility, and wanted documented assurance for herself and her siblings that she had fulfilled her commitment.
In addition to toting up the annual tax bill, a professional can help in another key area: tax planning for retirement. The complexity of the tax code makes finding the optimal path through the maze of differing rules for demanding a share of our money a daunting task. Paying for clear direction might pay off by keeping the total tax bite during retirement as small as possible.
3. Poorly armed. Whoever remarked that the person who is his own lawyer has a fool for a client might have been right. The complexity of the court environment can be unfriendly to the inexperienced. According to one study, nearly 200 discrete tasks are required to take a case through court, ranging from finding the appropriate court to negotiating a settlement. Even so, when faced with a civil court case, many folks choose to go it alone–and they nearly always lose.
Why do so many people show up for a courtroom fight without a lawyer? Fear of unaffordable fees keeps some from hiring an attorney. Another reason is ignorance of the law. The 2021 Justice Gap Measurement Survey found that, compared to low-income households, higher-income Americans have more confidence in their ability to find an affordable lawyer. They also tend to have more favorable views of the legal system. Yet, more than two-thirds of both groups failed to recognize that a lawyer could help them with their civil legal problems.
Thankfully, I’ve avoided being a litigant in a court case. Still, when a misunderstanding arose between my physical therapy state licensing board and me, I didn’t grasp that I needed an attorney to set things right.
The board contended I hadn’t met my required continuing education hours for license renewal. In addition to a hefty fine, it demanded I acknowledge guilt. I balked, because I knew I was compliant. The money aside, I was concerned for my reputation, so I dashed off a letter of explanation–which the board rejected. In frustration, I called my attorney cousin, who referred me to a partner who specializes in professional liability defense. His letter, along with supporting documents, not only convinced the board of my view point, but elicited a gushing apology for the accusation. In my case, the attorney refused payment, but I would have happily handed over my money to protect my name.
4. Heeding the signs. Sometimes, failing to seek advice can cost us everything.
The early signs and symptoms of a serious medical condition can be sneaky. It can be easy to ignore the occasional stumble as we walk, or a stomach ache that arrives with increasing frequency. If we do decide to question the cause, the internet’s myriad answers, along with suggested treatments to make the symptoms disappear, might not be the best choice.
Even so, according to one survey of American adults, 57% first ask the internet what’s causing their health symptoms. Many searches lead people to self-diagnose any of an array of medical conditions, with mental health being a common concern. But rather than comforting help, most respondents report feeling more anxiety after an internet consultation.
Is self-directed health research really that bad for us? It depends. If our quest leads to a trusted website, maybe not. We might be alerted to early disease signs of which we were unaware. But taking the next step is vital: research that identifies a possible medical condition, or that even yields information that’s inconclusive, needs follow up by consulting with a trained medical professional.
To illustrate: Early in my physical therapy career, a patient I was treating for joint pain presented to his Monday morning appointment complaining of his third day suffering from a persistent “stomach ache” and shortness of breath with mild exertion. He looked ill, and his blood pressure was abnormally low. I told him he would get no physical therapy that day, and advised him to seek medical attention immediately. He adamantly refused, stating he preferred to wait until his regular medical check up mid-week. He never made it to that appointment. When he failed to show up for PT on Friday, I called to learn he had died of a heart attack a couple of days following his visit with me.
Ed is a semi-retired physical therapist who lives and works in a small community near Atlanta. When he’s not spending time with his church, family or friends, you may find him tending his garden and wondering if he will ever fully retire. Check out Ed’s earlier articles.
Ed, well written and well said. Sometimes, DIY can be a disastrous choice.